The Reserve Bank of Zimbabwe kept its key policy rate unchanged at 200 percent in its latest Monetary Policy Committee (MPC) meeting held last Friday putting to bed hopes of a downward review this year.
The Bank hiked its policy rate to 200 percent from 80 percent earlier this year to tame rising exchange rate pressures that were emanating from borrowers who were using bank loans to buy USD on the parallel market.
In its MPC resolutions update, the Bank undertook the decision to, “maintain the Bank policy rate and medium-term lending rate at current levels of 200% and 100%, respectively and to review the interest rates in the first quarter of 2023 as dictated by inflation developments.”
Month-on-month inflation eased to 1.8 percent in November from highs of 30.7 percent in June this year as measures set by the government to stabilize the economy appear to have worked.
In the days leading to the MPC meeting, the November inflation figures had given hope that the Bank would review downwards the interest rates and bring relief to businesses which are chocking from costly borrowing.
Business organizations such as the Zimbabwe National Chamber of Commerce and Confederation of Zimbabwe Industries have been calling for the interest rate cut to assist struggling firms to access cheaper capital.
Other resolutions taken by the Bank include to further liberalize the foreign exchange market in the first quarter of 2023 and to enhance efficiency in the operation of the foreign exchange auction system and the willing-buyer willing-seller foreign exchange mechanism
The MPC also agreed to continue supporting the productive sectors of the economy through the Medium-Term Lending Facility (which the Bank will increase in 2023 from the current limit of ZW$ 10 billion to ZW$ 20 billion) under which micro, small and medium enterprises, individuals and the productive sectors of the economy can borrow at interest rates applicable from time to time.
It also resolved to review the foreign currency retention thresholds on exports and domestic FCAs during the first quarter of 2023 in line with improved efficiency of the foreign exchange trading systems in order to sustain the current growth trajectory in foreign currency receipts.